FCC finds wireless sector 'concentrated'

The Federal Communications Commission said the wireless industry is more concentrated, rather than effectively competitive, in its 14th annual report on competition in the wireless sector. The commission also said innovation abounds in devices and applications, but that capital investment is declining relative to the growing size of the industry.
The report could impact the FCC’s ongoing development of mobile broadband policies, including the National Broadband Plan and its efforts to reclassify some broadband services in order to be able to regulate them. The report covers the years 2008 and some of 2009.
While the report said key trends include a movement toward a data-driven traffic and that access to spectrum is important to competition, other findings may cause concern for operators that are fighting against more regulation. “There appears to be increasing concentration in the mobile wireless market. One widely used measure of industry concentration indicates that concentration has increased 32 percent since 2003 and 6.5 percent in 2008,” the FCC noted.
Further, the agency had a mixed message regarding industry’s capital investment in wireless products and services, a point that carriers and other wireless players have been touting in their arguments for less regulation. The FCC stated: “Providers continue to invest significant capital in networks, despite the recent economic downturn. One source reports capital investment at around $25 billion in both 2005 and 2008, while another shows that capital investment declined from around $25 billion to around $20 billion during the same period. Because industry revenue has continued to grow, both sources show that capital investment has declined as a percentage of industry revenue over the same period (from 20 percent to 14 percent).”
For its part, CTIA was unimpressed with the FCC’s findings. “We believe the commission missed an opportunity today to truly highlight one of the few glowing examples of investment, innovation and consumer choice in the U.S. economy. While we understand that the commission is not making any conclusion about the state of competition in the market, nor are they suggesting that the marketplace has changed to the detriment of consumers during 2008, we nonetheless are disappointed and confused as to why they’ve chosen not to make a finding of ‘effective competition’ for that year,” said CTIA President and CEO Steve Largent in a prepared statement. “The hairman has committed to a fact based, data driven commission. We have embraced that and placed numerous facts, in the record, about each element of the wireless ecosystem. We believe, based on the facts submitted, that a determination of effective competition in the wireless marketplace is not only inescapable, but is actually quite simple – ask any American. Whether based on HHI, the raw number of competitors in each market, investment, handset and network innovation, price or consumer choice, the U.S. wireless market is the envy of the world. That is why the lack of a finding is so troubling.
“In the same week that the European Commission releases its Digital Agenda for Europe, where they conclude that EU Information and Communications Technology research and development spending is 40 percent of the amount spent in the U.S., we believe that all policymakers should be celebrating, indeed applauding, the more than $44 billion that the wireless industry invested in networks and spectrum in 2008. That amount is significantly more than Germany, France, Italy, Spain and the U.K. invested – combined – in their wireless networks.”